Saturday, 12 September 2015

Are banks financing Burundi's innovative companies?

Banks have various important roles in an economy, and one of them is lending to firms with good prospects.  A way of measuring whether a firm has good prospects is whether it is innovative.  Are banks in Burundi fulfilling their role of financing innovative companies?


The graph shows the amount of working capital in Burundian companies financed by banks, for companies that introduced a new or significantly improved product over the period 2011-2014 (right side) and didn't (left side).  Innovative companies raised more of their funding from banks.  In both cases, bank finance accounted for the majority of companies' external funding requirements.

It might be that companies are not innovative because they couldn't get bank finance, rather than banks selecting innovative companies to fund.  However, the innovation is in the recent past, and financing is current, so it looks like banks are providing funds to more innovative companies.

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